XAUUSD caught the bid and broke above the bearish downtrend resistance
Spot gold appears to extend its current strength as investor sentiment worsens
Gold expenses should climb higher at the side of US Treasuries. However, CNY’s weak point ought to pose a headwind
Gold soared over one percent at some stage in Monday’s buying and selling consultation as markets reacted to the most current US-China Trade War headlines. The escalation in alternate tension between the US and China has despatched investors fleeing hazardous belongings like stocks and piling into safe havens like gold and bonds.
With today’s boost, XAUUSD seems to have smashed via the bearish downtrend formed by the collection of lower highs due to mid-February. With this technical resistance line not serving as an upside headwind, spot gold can hold climbing – especially if investor sentiment worsens and yields fall further.
TNX US 10-YEAR TREASURY RATE VERSUS SPOT GOLD PRICE CHART: DAILY TIME FRAME (OCTOBER 17, 2018 TO MAY 13, 2019)
The rhetoric surrounding the recent breakdown in Sino-American exchange talks sparked the pass into Treasuries, pushing authorities’ bond fees up and yields down. Consequently, the USA 10-year Treasury yield plummeted from an excess of two. Fifty-eight percent on May 3, down to a low of two.Thirty-nine percent these days as buyers flock to the safety of sovereign debt.
As the chart above illustrates, spot gold (shown on the inverse scale) tends to reflect US Treasuries because the yield-less commodity typically benefits from lower interest rates. But, it seems that XAUUSD bulls have cautiously unnoticed the current stretch lower in yield, which might suggest that gold’s secure-haven status could be losing faith.
Weakness within the Chinese Yuan ought to be one possible rationalization for the absence of enthusiasm for gold. Considering the exceptionally sturdy correlation between XAUUSD and inverse USDCNH, extra upside in spot gold prices may be confined despite falling yields if exchange tension continues with CNY under strain.
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